Zero Tolerance in the boards of GmbH and Aktiengesellschaft?

The tax case of FC Bayern München’s president and supervisory board chairman Uli Hoeneß leads beside aspects of tax fraud also to a corporate implication: shall a board member resign even if there is simply a suspicion of a criminal act resp. a criminal act in the private sphere? Shall the board undertake measures to let the board member resign? First of all, violations of duty in the professional sphere have to be handled according in Proportion. Minor violations entitle the company to react by disciplinatory measures, major violations may be answered by a contractual or even instant termination of the working relationship. Professional violations can be acts of theft, withholding, disloyalty, balance fraud etc against the own company. This is valid as well for “regular” employees as for Geschäftsführer, Vorstand or Aufsichtsrat of German GmbH or Aktiengesellschaft. In the private sphere there is the general principle of free self-development. This is true with respect to friends and acquaintances, sexual preference (e.g. homosexuality) and delicts committed in private life. A theft in the private sphere, therefore, does not justify a termination of the working relationship or board membership.

German courts acknowledge a reflex effect of private duty violations, however, if the same sphere of duties is at stake (e.g. a professional driver is alcoholic in the private sphere; a trustee commits a private breach of trust etc) or if – especially in the case of Geschäftsführer, Vorstand or Aufsichtsrat – the respective company has a sensitive public standing and, therefore, suffers from the private violations because his private life damages the company’s reputation. According to the courts and professional publications such damages may not occur in the case of tax fraud. Older cases show, however, that German courts acknowledged such damages in the case of immoral speculative business, high indebtedness, private bankruptcy etc. These court rulings date back from the 1950s, thus. Therefore, a specific evaluation of all circumstances is always necessary.

As a result one can see that the term of Zero Tolerance may apply on the professional sphere but may usually not be valid for the private life of board members. If a conflict occurs between company and board member Standard solutions should be avoided by both sides. Finally, there is no reason for a premature termination of the board membership by the individual board member itself.